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CBD vacancy report met by sceptical industry response

RECENT figures forecasting a 100 per cent increase in the vacancy level of top-end CBD properties in the next six months has been met with scepticism from within the Perth property industry.

The Knight Frank report, suggesting vacancy levels will lift to 24 per cent, came in response to the mid-year Property Council of Australia office market report. The Property Council study found there had been a fall in office vacancies from 11.6 per cent at the start of the year to 11.1 per cent – against the national trend towards increased vacancy levels.

Agents such as CB Richard Ellis FPD Savills dispute the findings and believe that, even with the completion of the new Woodside building, it is highly unlikely that the vacancy rates will increase dramatically in the next six months.

CB Richard Ellis Research figures predict an increase in overall vacancy to 14.9 per cent, with the A-grade segment of the market to increase to 15.2 per cent.

CB Richard Ellis director of office leasing Andrew Denny said that even these figures masked an unrealistically high future CBD vacancy rate.

“They include the 22,900 square metres forthcoming vacancy at the current Woodside Building at 1 Adelaide Terrace,” he said.

“Many commentators would see 1 Adelaide Terrace as a non-CBD location. If just this one building were removed from the figures, the overall and A grade vacancy rates would fall to just 11.3 per cent and 13.4 per cent respectively.”

Mr Denny said it was inevitable that there would be a short-term increase in vacancy rates when the new Woodside Building at 240 St Georges Terrace was completed, which at 46,000sq m will be the third largest building in the CBD.

Currently the total CBD office vacancy is 47,818sq m, he said.

“To get to 24 per cent we need over 126,000sq m of vacant A-grade space, and with virtually no new A-grade stock entering the market in the next six months,” Mr Denny said.

FPD Savills research manager Nick Goodrich described the forecast for 24 per cent vacancy rate as “excessive”.

“Under our models, even with an office oversupply scenario, the highest vacancy rate to be expected is 16 percent,” he told WA Business News.

Colliers International research manager David Cresp forecast the total CBD vacancy rate to be around 15 per cent, a more bullish figure than Knight Frank’s 17 per cent prediction.

“Over the course of 2003 we expect the net absorption to be positive, the increase of the vacancy rate is driven by the increase in supply not a weak business environment,” Mr Cresp said.

The WA business environment was in good shape, he said, and in time the office market would rebound.

NSC Corporate leasing manager Warren Wright said the forecast was on the high side and did not take into account the leasing that can occur over the next six months.

He said there was a danger that tenants and tenant advocates would use the forecast as leverage in leasing negotiations.

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